Banking and Money Matters

A very important consideration when relocating to a new country, either full or part-time, is "How do I handle my financial affairs?"

The simple answer is "not a lot different than back home". We literally do all our ‘back home’ bill paying over the internet and once you set it up it is a breeze and very convenient, especially if you are traveling.

Day to Day Living

Getting money into Mexico is not difficult. It can be as simple as using your ATM card, wire transfers to a local bank, cashing a check at a local cambio (you will need to establish an account first), or making deposits in a U.S. bank which are then transferred to a local ‘Investment House’ or ‘Bank’ (again, after you establish an account).

In each case, the fees and exchange rate vary so it basically comes down to personal choice.
This might be a good time to mention that Mexico is a cash society. Most of the smaller shops, stores, restaurants or service providers in the Lake Chapala area (and many other areas in Mexico) do not accept checks or credit cards so be prepared to pay with cash. Major credit cards are accepted in the larger department stores, grocery chains and organizations, while cash is the order of the day in the small mom and pop shops known as ‘tiendas’.

Only a few PEMEX (government owned Gas Stations all over Mexico) take credit cards, so if you are driving down or living in Lake Chapala and want to travel over to the coast or to Mexico City, may sure you have sufficient pesos on hand to pay for the gas and the tolls along the way.
That makes ATM cards very important in Mexico. You may be surprised to learn that there is a universal ATM network spread across the country and rarely will you have to search far to find one.
 
There are numerous banks in the area, most with a significant ownership interest by foreign banks. (U.S., Canadian, Brazilian, Spain and English banks have now taken large ownership positions in the major Mexican banks) Each bank offers ATM services and accepts ‘Cirrus’, ‘Plus’ and ‘Red’ systems as well as Visa and MasterCard. These banks also offer personal checking and savings accounts, investment accounts, wire transfer services and bill paying services. (Although checking accounts are available they are not widely used, except by businesses. As mentioned, many places do not accept checks; people pay in cash – pesos.)

They will also exchange foreign currency and traveler’s checks. You can get a ‘no fee’ ATM card and avoid banking fees by maintaining a minimum balance.

To open an account you will need to provide:
  • An FM3 or FM2 Visa
  • Passport
  • Proof of residency (a bill with your address on it)
  • Two references who can vouch for your financial stability.
    • I always find it amusing that you need references to put money into your account. For the most part, banks in the Lake Chapala area only offer ‘Peso’ accounts. There are situations where you can open U.S. Dollar accounts and you will learn what circumstances you can do this on our Focus on Mexico Programs. It is also possible to open an "offshore" account through the offshore branches or affiliates of a Mexican bank (usually for high net-worth people).  

       
Cambio(s) (Currency Exchange Houses)

Although people will usually accept U.S. dollars, the official currency in Mexico is pesos. (Canadian dollars, and other currencies, are more difficult to exchange so we recommend you bring U.S. Travelers Checks with you.)

There are several "Casa Cambios" (money exchange houses) where you can exchange foreign currency. Quite often the Cambios will offer a better exchange rate than the banks. Some Cambios offer check cashing facilities but you will need to establish an account and provide references – usually local people with established accounts.

We recommend that you change $50 to $100 dollars to pesos (small denominations as large denominations are difficult for the small shops to change) before you come so you’ll have some peso change to work with.

If you continue to maintain a U.S. or Canadian bank account, you will be able to use your universal bank card at most of the ATM’s in Mexico, as well as your major credit cards to take out cash advances.

  • We have three bank cards (Canadian, American & Mexican). We simply use whichever card we want the money to come out of. We receive it in pesos and it is charged against the appropriate account at the exchange rate on that date.
On our "Focus on Mexico Programs"you will learn the very best way to bring large amounts of cash to Mexico and convert into pesos at the best possible rate, potentially saving you thousands of dollars in exchange. If you are buying a home in Mexico, you may be surprised and pleased to learn that most houses in the Lake Chapala area that are For Sale are in U.S. Dollars so it’s not necessary to change to pesos (although you have the right to do so if you wish).
Investment Houses
Many people open an account at a local investment house because of the higher interest rates offered. They offer a variety of account types (similar to Mutual Funds) which vary from ‘conservative’ (usually government and major company short term paper) to ‘aggressive’ (bonds, stocks, and company paper). Annual returns vary but are usually higher than the banks
The longer established Investment Houses are secure (though not guaranteed like the banks). They will also provide additional services (insurance, travel, bill paying, etc) and cash withdrawal with notice (24 hours to 7 days, depending on the type of account).

Again, the system you choose will depend on your personal preferences. Some people prefer to leave their money in their home country and use ATM machines for cash withdrawals – enough to cover their cost of living here. Others will transfer three to twelve months living expenses to a local bank to minimize service costs where others will deposit more significant amounts into the Investment House(s) to take advantage of higher returns.
The best way to decide is to first understand the Mexican banking and investment system, talk to others that live here and then decide what is right for you. You’ll learn everything you need to know on a Focus on Mexico Program.

In fact, at our conferences, we will have Guest Experts from an investment house and bank talk to you about investing, the economy, the different types of accounts and interest you can earn and how to go about it. You’ll have a chance to talk to other residents and find out what they do and why.
 
Longer Term Investing
As we stated at the beginning of this section, longer term financial considerations are dependant on your individual needs and investing styles. For the conservative investor, with a well established portfolio, likely the only changes to consider are day-to-day living costs and your real estate needs i.e. whether to buy a home or rent.

For the active investor there are numerous opportunities to put money to work in Mexico. To encourage foreign investment, laws were changed to allow companies in Mexico to be owned 100% by foreign investors. This has opened up a myriad of investment opportunities in a wide variety of fields.

The State of Jalisco government is particularly active in attracting foreign investment. Potential investors are encouraged to contact the Secretary of Business Development to discuss business opportunities.

Incorporating a company in Mexico is a relatively simple procedure and can be processed in a few weeks by a ‘Notario’ (During a Focus Program, in the legal section of the Focus Manual, there will be a detailed description). There are a few restricted businesses but by and large the field is wide open. Import/export, high tech, real estate are popular investment avenues but, be it a small business or a Maquiladorar (Assembly Plant), the opportunities are available.

Note to Canadians:  ‘Canadian non-residency tax rules’ present additional opportunities. A detailed section of the Financial portion of our Focus on Mexico Program is dedicated to giving you all the information, all the rules and even the appropriate forms. You learn how to reduce your taxes on pensions down to 15% and taxes on capital gains to 0%.

The tax implications with an investment in Mexico depend on the type of investments and how the ‘business’ is structured. The amount of variations are too numerous to cover in this section, but will be discussed in more detail in our Focus Programs.

The basic rule is that taxes are due in Mexico on profits earned in Mexico. However, there are Tax Treaties between México and many countries that allow "offsets".

We have available, through our program, advisors that specialize in tax issues for foreign investors. They can help with the incorporation of a company to ensure the most favorable tax structure is incorporated.

 
 
Maintaining a Trading Account
Many people who decide to live in Mexico like to maintain a trading account. Through the internet, many discount brokers are accessible and you can do your research much the same as you would at home. Canadians who move into the Non-Resident system will need to make some adjustments and we will show you how to do this on a Focus Program.
 
Sample: Financial Indicators as quoted in Colony Reporter Newspaper
Mexican Stock Market (BMV) opened at 19,979.54 an increase of 587.37 points from Thursday, April 20, 2006
Interest paid on 28-day Treasury Certificates (CETES) was down 0.18 at 7.03 % from Thursday, April 20, 2006
Bank interest paid on 28-day 10,000 and 50,000 pesos Promissory Notes ranged from 1.15 to 5.50 %
U.S. dollar traded Thursday at 10.92 pesos buy, 11.22 pesos sell (quoted from Operadora de Fondos Lloyd money exchange house).
Canadian dollar traded at 9.55 pesos buy, 10.07 sell. (quoted from Operadora de Fondos Lloyd money exchange house)
Inflation (March 2006): 0.13 %
Annual Inflation (from March 2005 to March 2006): 3.41 percent (from The Mexico City daily El Financiero)
 
 
Important information for managing Financial Matters when Living in Mexico. Transfer money for vacations, Real estate and daily living.